How To Avoid Being Ripped Off On Wholesale Fuel

Who Can You Trust?

Sometimes it seems that nobody can be trusted these days—fuel suppliers being no exception. The wholesale fuel business has earned quite a reputation for itself: greedy, frauds, price-gougers, and back-door dealmakers against whom an honest buyer of wholesale fuel has little chance of coming out on top.

Breaking Bad … “Jacking The Discount”

The latest shocker hit just last year by way of a nationwide fuel rebate scandal that cheated thousands of freight companies out of millions of dollars in promised rebates on wholesale diesel orders.

The scheme, which came to be known as “Jacking the Discount,” involved certain sales reps from a major supplier of fuel to the transportation sector who sold truckers diesel contracts that were supposed to include generous monthly rebates. Instead, the supplier was caught pocketing over $66 million dollars of those “rebates” that never found their way to the transportation companies promised them.

An FBI raid, criminal convictions, and a bruising penalty of $85 million dollars later, the supplier admitted in court documents to defrauding over 2,400 trucking companies across the country, some of which are litigating as you read this, trying to cut their losses from this latest scandal to disgrace the wholesale fuel industry.

Some Hard-Learned Lessons

The massive FBI investigation revealed two basic ingredients that, combined, gave rise to and fueled (no pun intended) a widespread scheme that went on for over five years:

Thousands of unsuspecting wholesale fuel buyers who did not closely track their fuel purchases.

A handful of cheaters who felt justified doing what they did, reasoning that if the customers weren’t smart enough to know what they were and were not getting, then they didn’t deserve the rebates.

This isn’t meant to further indict this particular wholesaler. A small band of ‘bad’ guys did the damage. Now, by all accounts, the company has been exemplary in taking the steps necessary to right its ship. But lessons can be learned by all, and that is the point and purpose of this article.

Fuel suppliers and fuel buyers are not immune: we are all susceptible to fraud. Understanding the chemistry that produced this criminal conspiracy will reveal the warning signs of possible fraud and provide some guidance to help keep your fuel buys both clean and profitable.

The Chemistry For Fuel Fraud

Let’s face it, fuel is expensive. The typical order is roughly the price of most brand-new cars. Yet, fuel purchasing has more or less been a handshake business—which is pretty amazing when you think about it: In what other industry can you routinely buy something that costs $30,000 dollars with a quick phone call or text? When such large amounts of money transfer hands, the conditions are ripe for mistakes, misunderstandings, and fraud.

If you catch a supplier price-gouging you, don’t ever trust them again. If they did it once, then to one degree or another it’s part of who they are, regardless of the reason. If you catch them and they reduce the price, it doesn’t change the fact they ripped you off in the first place. There is a fundamental difference in values that should be avoided at all costs.

2) No Price Transparency

Buying fuel without price transparency (not knowing the various components and costs that make up the price) is the most common cause of fuel fraud. In the rebate theft described above, sales reps were actually trained to prey only on customers who they knew were not “sophisticated” enough to realize they were being taken for a ride. Here’s an excerpt of an indicted sales manager unwittingly recorded teaching other salespeople how to target less savvy customers:

“Some of ‘em don’t know what a spreadsheet is. I’m not kiddin’. So, again, my point is this: Know your customer…If the guy’s sophisticated and he truly has gone out and gotten deals from the other competitors and he’s gettin’ daily prices from us, don’t jack with his discounts, ‘cause he’s gonna know, okay?” (FBI evidence)

You don’t have to be super sophisticated to keep from being cheated, you just have to order and track your fuel purchases faithfully, and only pay a price that is based on a neutral, third-party, industry standard. For example, ‘cost-plus’ pricing (once commonly used by the supplier behind the rebate scheme) is not the most transparent way to purchase fuel. In fact, it’s very unlikely you will ever know exactly how much your supplier pays for the ‘cost-plus’ loads they’re selling you.

3) Archaic Ordering & Tracking Systems

Another key ingredient in the formula for fuel fraud is the archaic ordering and tracking systems still used in the industry. As the FBI investigation revealed, the “manual processing” of rebates proved to be one of the ways the thieves were able to get away with deceiving so many customers. (As a result, the company is now processing all transactions electronically.)

A Formula For Trust T = OC x RFT

(Trust = Over Communication x Ridiculous Follow-Through)

At Desert Fuels, we specifically watch out for the various fraudulent ways fuel can be bought and sold. If we can identify formulas for fraud, then we can avoid it and help our customers protect themselves as well.

In fact, that’s a primary reason Desert Fuels exists: “To repair the broken trust of the fuel industry.” We are revolutionizing the way wholesale fuel is bought and sold and we’re doing it by serving our customers, not stealing from them, and by helping, not hurting the people and businesses that keep us in business. That motivation, that priority, makes everything better, helping both our customers and us buy smarter. And then we top it off with a healthy dose of ‘ridiculous follow-through.’

1) Verify and Confirm

Why confirm an expensive order of fuel with only a nod or handshake? There’s too much riding on getting it correct. At Desert Fuels, we have a simple way to verify that we both clearly understand what you ordered. It’s called (simply enough) “Order Confirmation,” and it’s everything you need to ensure your order gets to you exactly the way you placed it.

We then combine that with our “Human-Friendly Pricing” system that ensures you receive our daily price so you can easily see and confirm the cost of each component of the amount you’ll pay—fuel, freight, taxes, and any discounts that may apply.

2) Transparency in Pricing Based on a Third-Party, Industry Standard

Part of our mission at Desert Fuels is to blow open the closed doors of the fuel industry. We’ll give you the industry’s secrets; that won’t make our competitors happy, but it’ll make you a smarter buyer.

The best way to know that you are purchasing at a fair and competitive price is to compare multiple daily prices from multiple suppliers or, better yet (and a heck of a lot easier), contract a price based on a published, third-party industry standard, such as OPIS, a fuel industry pricing benchmark.

OPIS-Based Pricing is Making Public the Private Information of the Fuel Industry.

At Desert Fuels, we utilize pricing mechanisms that provide the most transparency, information, and insight into the fuel market so that you can be assured you are always buying at a competitive price. Transparency is the way to guard against being exploited by greedy, price-gouging cheats, as explained in our blog “Fuel Pricing and Contracts 101: OPIS.”

3) Technology

Let’s face it, technology in the wholesale fuel industry is archaic. Keeping buyers in the techno-dark ages is one of the ways fuel suppliers have been able to take advantage of unsuspecting, less tech-savvy customers.

Transforming the archaic practices of the industry is one of our first priorities. We are determined to revolutionize the way wholesale fuel is bought and sold.

That’s why we’ve given our customers the most revolutionary tool of its kind in the industry. It’s called PowerFuel™.

PowerFuel™ is an ingenious, new iPhone/iPad App invented by Desert Fuels for serious bulk fuel buyers. PowerFuel™ tracks fuel price movement and provides simple, market-based suggestions to “Order fuel for Today,“ “Order fuel for Tomorrow,” or “Wait to order fuel.” Plus, our customers enjoy fingertip ordering, confirmation, delivery tracking, and monitoring their account history, all from the palm of their hand.

Want to make smarter buying decisions? Give PowerFuel™ a try.

Conclusion

At Desert Fuels, we know why we wake up in the morning: To Fix the Broken Trust of the Fuel Industry. If you think we’re falling short of our goal, call us out, and as soon as possible. Because it’s such a huge part of why we do what we do, and there’s no reason, or excuse, that should keep us from nailing it every time.

Check us out: We believe you’ll find in Desert Fuels what you’ve been hoping for.

About the author

Dan Lewis

While better known for his versatility as an accomplished businessman, city councilor, community pastor, and recent candidate for the US Congress, Dan is passionate about the fuel industry - and Desert Fuels in particular—bolstering our team in the spring of 2012 to great acclamation. Inspired and inspiring, Dan enhances everything he works on, including our network of reliable fuel suppliers that he’s helping us grow nationwide. Honest, wise, and persistent, Dan is helping Desert Fuels revolutionize and simplify the way our industry does business.

We would love to come up with an android version of the app. Unfortunately, the demand has just not been there for android. But we will put this down as a request in hopes that we will invest in that at some point.